Following State LGA Cut, City to Implement Waterfall of 2011 Budget Cuts
‘State deficiency budget’ passed in December will cut paving, slow debt repayment and cut police and fire — on top of 80 City positions already cut in 2011 budget
July 21, 2011 (MINNEAPOLIS) Following the State of Minnesotas cut of $23 million in Local Government Aid (LGA) to Minneapolis for 2011, Minneapolis Mayor R.T. Rybak and City Council President Barbara Johnson have asked City department heads to implement the waterfall of cuts to the City’s 2011 budget that the Mayor and City Council approved last December.
This waterfall of cuts will come on top of cuts of 80 full-time positions in the City of Minneapolis already made in the 2011 budget. The cuts include a cut to the City’s 2011 paving programs of more than 50 percent, over $7 million in cuts to paying down pension debt and $2.8 million in cuts to the Police and Fire Departments.
The cuts also include an across-the-board cut to all City departments to recapture reductions to health-care costs that had been allocated to departments.
The 2011 budget was approved on the assumption that the State would honor its certified commitment of $87.5 million in LGA to Minneapolis. However, it also included a waterfall of up to $23 million in additional cuts, called the State Deficiency Budget, to be triggered if the State failed to deliver on that commitment. Now that the State will return only $64 million in LGA to Minneapolis in 2011, the full waterfall is triggered. (The $64 million in LGA that Minneapolis will receive in 2011 is the same amount that Minneapolis received in 2010; however, the 2010 amount represented a cut of $26 million from the $90 million in LGA that the State had previously certified that year.)
"Reluctantly, we must make the cuts that we said we would make, because the State has left us no choice," said Mayor R.T. Rybak. "We are cutting much-needed street paving despite this years record numbers of potholes. We are slowing our debt repayment despite the fact that doing so has helped restore Minneapolis AAA bond rating and save taxpayers money. And we are cutting positions from Police and Fire despite achieving record-low levels of crime this year."
Because the City’s 2011 maximum property-tax levy was set in September 2010, State cuts to LGA mid-budget cannot be met with tax increases and must be met with cuts to services.
"These cuts will be felt across our city, not only by Minneapolis residents but by the hundreds of thousands of people from across our state who visit Minneapolis for work, school, play and medical care," said City Council President Barbara Johnson. "I am grateful to Governor Dayton for his attempts to protect Minneapolis residents and visitors from harmful cuts and balance the State’s budget fairly, but am deeply disappointed in this outcome."
In February of this year, Governor Mark Dayton’s budget proposal fully funded LGA for Minneapolis and all Minnesota cities at certified levels. In May, however, the Legislature voted to eliminate LGA to Minneapolis, Saint Paul and Duluth entirely by 2014, beginning with a cut of nearly $40 million in 2011.
"The Legislature could have made the tough choice to fund State government sustainably, as we have done in Minneapolis, but it did not. Cities are where the rubber meets the road, so the Legislature’s refusal to do so has left us with no other option but to make harmful cuts," Mayor Rybak continued.
As a result of the State of Minnesota’s failure to deliver on promised LGA, the City of Minneapolis will make the following cuts:
• $7.1 million to pay down pension debt.
• $6.2 million in street paving — equivalent to more than 50 percent of the City’s 2011 paving programs.
• $2.8 million to offset future property-tax increases.
• $2.0 million in across-the-board cuts to all City departments, recapturing reductions to health-care costs that had been allocated to departments based on current service levels.
• $1.7 million in budgeting for no wage and salary increases for City employees, for the first of two years.
• $1.1 million to avoid layoffs in the Fire Department.
• $1.0 million to the Minneapolis Park and Recreation Board and the Municipal Building Commission.
• $0.7 million for one-time, innovative initiatives.
• $0.5 million to avoid layoffs in the Police Department.
• $0.35 million for innovations in Neighborhood and Community Relations and Business Information Services.
In addition to the cuts to Police and Fire in the waterfall, those departments will take an additional cut of approximately $850,000 and $350,000, respectively, as their proportion of the across-the-board cut to all departments to recapture reductions in health-care costs that had been allocated to departments, bringing for a total cut of $1.35 million to Police and and $1.45 million to Fire. These cuts to Police and Fire come on top of the 24 full-time positions in Police and 32 full-time positions in Fire that were already cut in the City’s 2011 budget.
Quick facts about Minneapolis’ budget and Local Government Aid:
• LGA is not a handout: in 2011, the State will collect nearly $400 million more in sales taxes and commercial-industrial property taxes in Minneapolis than it will return to Minneapolis in LGA.
o The State will collect approximately $380 million in sales taxes in Minneapolis in 2011.
o The State will collect approximately $75 million in commercial-industrial property taxes in Minneapolis in 2011.
o For that $455 million collected in those two taxes alone, the State will return only $64 million in LGA to Minneapolis in 2011.
• Since 2002, Local Government Aid to City of Minneapolis has been cut a total $352 million, including $71 million in last four years.
• Because of LGA cuts, the burden of paying for basic services has shifted onto property taxes.
o In 2003, State Aids (mostly Local Government Aid) supplied 40% of Minneapolis’ General Fund revenue while property taxes supplied 25% of the revenue.
o In 2011, State Aids are supplying just 23% of General Fund revenue while property taxes are supplying 44% of the revenue.
• During the years of State budget turmoil, the City of Minneapolis has exercised fiscal responsibility.
o The City of Minneapolis spending is 8% less than it did 10 years ago, after adjusting for inflation.
o The City of Minneapolis has 10% fewer full-time positions than 10 years ago.
o Since 2002, the City of Minneapolis has paid down $130 million in debt and restored the City’s AAA credit rating.
Published Jul. 21, 2011